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Deloitte claim Premier League wages at record high

May 31, 2012

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• Wages went up to almost £1.6bn in 2010-11
• Increase outstripped the growth in revenues

The rise in player wages has reached record levels in the Premier League – a worrying trend with clubs now subject to Uefa’s financial fair play rules.

The latest annual review of football fin ance by Deloitte shows the increase in wages outstripped the growth in revenues.

It has resulted in a wages/revenue ratio of 70% in the Premier League – a record figure having crept up from the low- to mid-60s five years ago.

Wages went up by £201m in 2010-11 to almost £1.6bn, a 14% rise, and overall revenues rose by 12% to £2.27bn. This was mostly driven by a rise in income from the new TV deals, especially from overseas rights.

Alan Switzer, the director in the sports business group at the analyst Deloitte, said wage control was paramount for good business.

He said: “If the wages to revenue ratio is 70% or higher it’s very difficult to make an operating profit.

“In our view it is too high as a league and the clubs need to be edging back to the low 60s. Every 1% that it drops should increase operating profits by £20m to £25m.”

The wage rises at some of the bigger clubs have been offset by significant rises in commercial income at s ome sides, including Manchester United, Liverpool and Manchester City.

The figures are for the 2010-11 season so are the last ones before Uefa starts taking them into account for its financial fair play (FFP) calculations where clubs in European competition have to break even.

Switzer said Manchester City and Chelsea faced the greatest challenges in conforming to the FFP rules.

“Chelsea and Manchester City are the clubs which have recorded the biggest losses so they are the two which have the most to do, and to be fair to them they have been pretty public about needing to take action,” he added.

“A significant number of clubs around Europe have some distance to travel on the road towards compliance.”

The Deloitte report does not cover the most recent season, but it does show the effect of the 50% tax band coming into play – the 92 league clubs paid nearly £1.2bn in tax, up 20%.

The report also shows almost half of top-flight clubs had a reduction in match day revenue reflecting the fact that many have been cautious about raising ticket prices during the current economic climate.

Other points highlighted by the report include:

• Combined pre-tax losses among Premier League clubs were £380m, while transfer spending increased by £210m (38%), to a record level of £769m.

• Total revenue in the Championship increased by £17m (4%) to £423m, partly caused by an increase in the solidarity payments from the Premier League.

• The wages/revenue ratio in Championship clubs was an even-more worrying figure of 90%.

• The Bundesliga remained Europe’s most profitable league with operating profits of £154m, a 24% increase. In the Premier League, overall operating profits decreased by £16m to £68m.

• Net debt in Premier League clubs fell by £351m (13%) to £2.4bn, the lowest level since 2006. Of that, 62% (£1.5bn) is in non-interest bearing “soft loans”, most of which r elates to three clubs: Chelsea (£819m), Newcastle (£277m) and Fulham (£200m). Read More

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